Market Power in the Russian Banking Industry

27 Pages Posted: 25 Mar 2010  

Zuzana Fungáčová

Bank of Finland - Institute for Economies in Transition (BOFIT); Charles University in Prague - Department of Economics

Laura Solanko

Bank of Finland - Institute for Economies in Transition (BOFIT)

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie)

Date Written: March 5, 2010

Abstract

The aim of this paper is to analyze bank competition in Russia by measuring the market power of Russian banks and its determinants over the period 2001-2007 with the Lerner index. Earlier studies on bank competition have focused on developed countries whereas this paper contributes to the analysis of bank competition in emerging markets. We find that bank competition has only slightly improved during the period studied. The mean Lerner index for Russian banks is of the same magnitude as those observed in developed countries, which suggests that the Russian banking industry is not plagued by weak competition. Furthermore, we find no greater market power for state-controlled banks nor less market power for foreign-owned banks. We would consequently qualify the procompetitive role of foreign bank entry and privatization. Finally, our analysis of the determinants of market power enables the identification of several factors that influence competition, including market concentration and risk as well as the nonlinear influence of size.

Keywords: market power, bank competition, Russia

JEL Classification: G21, P34

Suggested Citation

Fungáčová, Zuzana and Solanko, Laura and Weill, Laurent, Market Power in the Russian Banking Industry (March 5, 2010). BOFIT Discussion Paper No. 3/2010. Available at SSRN: https://ssrn.com/abstract=1578247 or http://dx.doi.org/10.2139/ssrn.1578247

Zuzana Fungacova (Contact Author)

Bank of Finland - Institute for Economies in Transition (BOFIT) ( email )

Snellmaninaukio
PO Box 160
Helsinki 00101
Finland

HOME PAGE: http://www.bof.fi/bofit_en/index.htm

Charles University in Prague - Department of Economics ( email )

Opletalova 26
Prague, 11000
Czech Republic

Laura Solanko

Bank of Finland - Institute for Economies in Transition (BOFIT) ( email )

Helsinki 00101
Finland

HOME PAGE: http://www.bof.fi/en/suomen_pankki/organisaatio/asiantuntijoita/solanko_laura/

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie) ( email )

61 Avenue de la Forêt Noire
F-67085 Strasbourg Cedex
France

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